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Tuesday, February 24, 2015

How will the stalemate end in Venezuela?,

Venezuela is in a jam of a situation. Inflation is supposedly at 67% though it is acknowledged that food inflation is around 90+%. When I got to Venezuela a carton of eighteen eggs went for 183 bolivares. At the beginning of February I saw a carton of eggs at 283 bolivares. When I got to Venezuela in early November 93 bolivares bought one Yankee dollar on the illegal parallel market. A week later it was 100:1, soon thereafter it was 120:1, a week later around 150:1, ten days later 180:1 or so. Today it's around 170/1 in Cucuta, Colombia and on the new restricted and regulated market and supposedly 190/1 on the totally illegal market, which, by the way flourishes on the streets in front of and around the National Assembly Building in Caracas.

Gasoline is virtually given away to automobile owners in Venezuela and it seems to be intuitively correct that this is an issue that the government must take on. I was one who was pleased to see President Maduro announce that he would be doing just that. After doing the some reading I see it as a poor policy choice, at least for the present. Gasoline prices are hundreds of times higher in neighboring Colombia and Brazil. Not surprisingly gasoline smuggling is big business
It is believed that forty percent of gasoline ends up smuggled out. Motorists in border regions park in long lines to gas up. Raising the price would not take the profits out of this business. The gasoline money gets converted into black market rate Bolivares. Hard to imagine whatever connected persons who are in on this racket stopping the trade because profits are only two hundred percent and not two thousand percent.

A price rise would signal another round of inflation imiserating millions even further.

What needs to be addressed is the sale of petro dollars at a rate of 6.3/1 and 12/1Bolivares to connected persons and entities. The original stated purposes of the regulation of the currency exchange were noble: Subsidising staples and staunching capital outflows. Are these goals actually being met?

The masses of Venezuelans, mainly women , spend hours every week on ques trying to get milk, corn flour, toilet paper and toothpaste.

Pro government polling firm Interlace tells us that seventy percent of Venezuelans believe the country is going in the wrong direction
Only twenty percent support President Maduro. Only less than five percent get their news information from the Government run television stations. You would have to conclude that the opposition could easily collect the necessary two million signatures required to get a vote to recall President Maduro, who just raised bus fares for the poor. You would have to think that the opposition could count on a sweep in the upcoming National Assembly elections. You would have to suppose that their calls for mass protests would get massive support. You would be wrong, because the opposition is even more unpopular than President Maduro is. I have to agree with the seventy percent of the Venezuelans who say that their country is on the wrong track.